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updated 1/5/2010 11:26:13 AM ET 2010-01-05T16:26:13

Guests: Charlie Cook, Howard Fineman, Matt Nesto, Eugene Robinson, Michael Smerconish, Richard Engel, Bobby Ghosh, Anne Kornblut, Jonathan Martin

CHRIS MATTHEWS, HOST:  Cheney the meanie.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews in Washington.  Leading off tonight:

The patriot game.  How long and how low can it go?  First, Dick Cheney wrongly accuses President Obama of pretending we‘re not at war.  Now Senator Jim DeMint of South Carolina says there‘s no question that the president has downplayed the terrorists since taking office.

The president‘s top counterterrorism adviser made it clear on “Meet the Press” this Sunday that Cheney is either ignorant or lying.  You have to wonder whom Cheney thinks is the real enemy here, al Qaeda or his own president.  And why is every disagreement over policy these days open up a charge of not wanting to defend the country?  Tell us that, Mr. Cheney.

And the al Qaeda threat mounts.  It turns out that seven CIA officers killed in Afghanistan were not the victims of a rogue terrorist but of a cunning al Qaeda double agent.  This is what we‘re up against these days, smart people, bad people against us.  Our own Richard Engel tonight on the cloak-and-dagger story that turned so deadly for us and for our intelligence people.

Plus, it‘s 2010, and HARDBALL‘s going to be the place for politics again this year.  You‘re going to get all the latest on this year‘s mid-term elections, which are going to be concluding this November.  Tonight, we‘re going to take a first look at where things stand right now, at the beginning of the year.  The big question, Could the Republicans take back the House of Representatives?  Could they knock off Speaker of the House Nancy Pelosi?  It looks fairly likely that they could.

Also, everyone is entitled to a vacation, but let‘s talk about the optics—that‘s the new word this year already—of a president vacationing in Hawaii in the wake of the failed Christmas plane bombing.  To use a baseball term, was the president almost picked off at first?

Finally, in case you missed it, Rush Limbaugh managed to turn his trip to the hospital last week into an attack on President Obama and the Democrats.  Look, I‘m sincerely happy Rush is OK, but does the man have to turn even an emergency hospital visit into a political event?

Let‘s talk about Cheney and his chiding.  Let‘s bring in “The Washington Post‘s” Eugene Robinson, who‘s an MSNBC political analyst, and radio talk show host Michael Smerconish, who‘s already got the Cheshire cat look on his face, which I do enjoy, the man from Philly, MSNBC‘s—tough day for the Eagles yesterday.  Another week to go and another tough one down there.

Let‘s look at this.  Dick Cheney‘s new hobby seems to be crawling out from out of the shadows on a routine basis.  I wonder whether he and his wife have some sort of an old Gestetner reprinting machine down there, wherever they live over in Virginia.  And they every once in a while issue statements attacking President Obama.

Well, here he was the other day, attacking President Obama‘s decision and making—about the president‘s leadership.  Cheney said that, quote, the president—“President Obama is trying to pretend we‘re not at war.”

Here‘s John Brennan, however, yesterday, President Obama‘s top counterterrorism adviser, reacting to Cheney Sunday.  By the way, John Brennan also worked with Cheney.  Let‘s listen.

(BEGIN VIDEO CLIP)

JOHN BRENNAN, DEPUTY NATIONAL SECURITY ADVISER:  I‘m very disappointed in the vice president‘s comments.  I‘m neither Republican nor Democrat.  I‘ve worked for the past five administrations.  And either the vice president is willfully mischaracterizing this president‘s position, both in terms of the language he uses and the actions he‘s taken, or he‘s ignorant of the facts.  And in either case, it doesn‘t speak well of what the vice president‘s doing.

I would not have come back into this government if I felt that this president was not committed to prosecuting this war against al Qaeda.  And every day, I see it in the president‘s face.  I see it in the actions he‘s taken.  And so I‘m confident that this country is, in fact, protected by this president‘s position on al Qaeda and against terrorist activities.  We‘re going to continue to do this.  We‘re going to do it hard.  We‘re going to do it constantly.

(END VIDEO CLIP)

MATTHEWS:  Well, I can‘t think of a better blocking back than this guy.  He came out strong, Gene...

EUGENE ROBINSON, “WASHINGTON POST,” MSNBC POLITICAL ANALYST:  He did.

MATTHEWS:  ... and I think he‘s made a very good bipartisan, non-partisan case against Cheney‘s yapping.

ROBINSON:  Well, he did.  And I—I just thought Cheney‘s statement to “Politico” last week was way off the reservation.  It included criticism of President Obama for handling the case of the attempted underwear bomber in federal court, exactly the same way that Cheney and Bush handled the case of the shoe bomber in federal court.  He‘s now in a federal prison.  So the criticism itself just didn‘t make any sense, except as just kind of an ad hominem...

MATTHEWS:  Yes.

ROBINSON:  ... crazy attack.

MATTHEWS:  You know—you know, Michael, the same point can be made that the president, President Bush at the time, took six days to respond to that shoe bomber, and nobody was keeping a clock on him.  This time, Cheney came out six days later but two days after the president had already spoken, attacking him for not having spoken sooner, when he spoke two days before Cheney did, which was about the time—well, Cheney was keeping time with the way Bush used to do it, six days late.

How come they keep coming up with different scorecards, Cheney, for Republicans and Democrats?  By their own scorecard, they get zeros?

MICHAEL SMERCONISH, RADIO TALK SHOW HOST, MSNBC POLITICAL ANALYST: 

Your reference...

MATTHEWS:  Michael Smerconish.

SMERCONISH:  ... of President Bush‘s name—your reference of President Bush‘s name I think makes a significant point.  Look at the dichotomy between Bush‘s silence and Cheney‘s constant carping against this administration.

Chris, I reached out for H.W. Brands, the presidential historian, because I wanted to know who is more in line with their predecessors.  And clearly, the answer is George W. Bush by his silence, the exception being if a vice president holds a desire to run for the highest office.  I don‘t get that from Dick Cheney.

So here‘s the question I ask.  What is his motivation?  Is his motivation to right the ship, as he sees it?  I don‘t think so.  Or is it just to tear down the commander-in-chief?  And my big objection is not so much the substance as it is the timing.  I mean, how about the fact that here was President Obama, after he was reviewing the situation for Afghanistan—according to Dick Cheney, that was dithering.  But when he‘s finally ready to go to West Point and make known a war plan, the vice president gives 90 minutes to “Politico” to cut out his knees from under him.

I thought that was appalling.  I thought that was offensive.  And if the roles had been reversed, you can imagine the hue and cry from the GOP.

MATTHEWS:  You would think that a guy who had run an operation where his chief of staff was hit for five felony counts and convictions, that he wouldn‘t be talking so much.

Here‘s President Obama, by the way, on December 28th, just two days after—actually, two days before Cheney‘s attack, actually getting well ahead of him.  Here‘s the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  A full investigation has been launched into this attempted act of terrorism, and we will not rest until we find all who were involved and hold them accountable.

We do not yet have all the answers about this latest attempt, but those who would slaughter innocent men, women and children must know that the United States will do more than simply strengthen our defenses.  We will continue to use every element of our national power to disrupt, to dismantle and defeat the violent extremists who threaten us, whether they‘re from Afghanistan or Pakistan, Yemen or Somalia, or anywhere where they are plotting attacks against the U.S. homeland.

(END VIDEO CLIP)

MATTHEWS:  (INAUDIBLE) John Brennan, a civil servant, the other day, who risked his life over in Saudi Arabia as station chief all those years, Michael, and coming out and saying the president he works with every day shows tremendous zeal in trying to track down the enemy and fight the al Qaeda we‘re fighting and has said so many times.

What gets to me is that Dick Cheney has attacked the president for wanting to try this guy in court and letting him have a lawyer, when that‘s exactly, as Gene points out—exactly what the Bush administration did with the shoe bomber.  They allowed him to defend himself in criminal court.  They allowed him to lawyer up, if you will.  And now they‘re attacking Obama for doing the identical thing.

SMERCONISH:  I think that the complaint that Cheney raised in that incident, former vice president Cheney—because I do respect the man—again, the timing of it—not only was it unfounded based on the facts, but what was the purpose in him almost beating the president of the United States to the punch in addressing this subject?  Chris, it was to malign the president and to make sure that the ship can‘t be righted, if it is out of alignment.  And that‘s what I object to the most.  I mean, at what point are we no longer Republicans and Democrats, liberals and conservatives...

MATTHEWS:  Yes.

ROBINSON:  Yes.  Yes.

SMERCONISH:  ... but instead, Americans under siege in this country?

(CROSSTALK)

ROBINSON:  I mean, here‘s another theory, that this is not rational, that this is not thought out.  That in...

MATTHEWS:  Well, you think he is a troll.

ROBINSON:  Well, no, that, in fact, the—the—frankly, the paranoia that some people sense in Dick Cheney, in the sense that under every rug and under every bed and around every corner is a potential terrorist holocaust—that this is internalized, that this is real, and that this is—that he‘s not seeing the situation as clearly as possible.  That‘s one theory.

MATTHEWS:  Well, here he was last week.  Quote—this is—well, this is Dick Cheney.  He‘s amazing.  The quote—quote, “It seems that President Obama seems to think that if he gives terrorists the rights of Americans, lets them lawyer up and reads them their Miranda rights, we won‘t be at war.  He seems to think that if we bring the mastermind of September 11 to New York, give him a trial and a lawyer in civilian court, we won‘t be at war.  He seems to think that if he closes Guantanamo and releases the hard-core al Qaeda-trained terrorists still there, we won‘t be at war”—here again, he‘s completely caught flat-footed!

Michael, it was the past administration that released the two guys to Yemen, that were the controls for this guy that was on the plane the other day from Nigeria.  They have no sense of guilt or shame, when they‘re the ones caught here.  It wasn‘t this president that released al Qaeda to—that caused this damage to us, almost damage.

By the way, here‘s Jim DeMint, who seems to be learning how to synchronized-swim with the former vice president.  I don‘t know where he—well, clearly, he‘s just using the guy‘s words.  Here he is on CNN on Sunday.  This is Jim DeMint of South Carolina.

(BEGIN VIDEO CLIP)

SEN. JIM DEMINT ®, SOUTH CAROLINA:  If we had treated the Christmas Day bomber as a terrorist, he would have immediately been interrogated military style, rather than given the rights of an American and lawyers.  We probably lost valuable information.  It does come down to a decision of whether or not this is an act of war, an act of terror, or just a criminal act.  So there‘s some real implications of the direction that‘s being taken now.  I agree with Senator McCaskill, we need to take the politics out of this.  But there‘s no question that the president has downplayed the risk of terror since he took office.

(END VIDEO CLIP)

MATTHEWS:  What do you make of that?

ROBINSON:  Well, I just think, objectively, it‘s not true, number one.  Number two, I think you could have a civilized discussion about whether Abdulmutallab should have been treated and dealt with in a military tribunal or not.

MATTHEWS:  Yes, well, I‘m with you on that.  I don‘t think—I don‘t think he should have gotten—I think he should have gotten a military tribunal myself.

ROBINSON:  But—but you know, our editorial page looked at that and came to the conclusion that this was the right way to handle it, that in fact, he was talking.  He‘s already giving up his handlers. He‘s given up the whole operation—that there was no reason to send him the military tribunal route.  But the point is, of course, that‘s not the kind of civilized discussion that‘s being had, with reference to what‘s been done in the past, with reference to the merits of the case.  It‘s just a kind of inchoate yawp at this administration.

MATTHEWS:  Well, the main point, Michael...

ROBINSON:  To try to create doubt.

MATTHEWS:  ... seems to be they‘ll use these technical arguments—whether we go to a military court or we go to civilian court—to make their larger point, which is that the president United States doesn‘t care about defending us, who doesn‘t believe we‘re under threat from al Qaeda.

And they say he never says the word “terror.”  Well, here he is at his inauguration, beginning his administration.  Let‘s listen to President Obama about a year ago.

(BEGIN VIDEO CLIP)

OBAMA:  We will not apologize for our way of life, nor will we waver in its defense.  And for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken.  You cannot outlast us and we will defeat you!

(END VIDEO CLIP)

MATTHEWS:  Well, Michael, that‘s a pretty good cris de guerre.

SMERCONISH:  Listen, not only was that offering, I think, right on point, but so, too, was the president‘s inaugural radio address for 2010.  And he said all the right things, at least in my view, on Saturday in the radio address.  And Chris, how about the speech that he offered at West Point, when there was deafening silence from the right?

And please don‘t think that I‘m buying into all ways in which the Obama administration is fighting what I still regard as a war against terrorists.  But I think that this criticism is not only unfounded but ill-timed.  And my bigger criticism is that it‘s ill-timed and it seeks to undercut the commander-in-chief.

MATTHEWS:  And I think that this president knows that it‘s a war against al Qaeda, in particular, not against a tactic of war, like terrorism.  It‘s against a group of people trying to kill us.  And by the way, as you pointed out to your credit for eight years or nine years now, they haven‘t caught bin Laden.  He is the leader of al Qaeda.  They haven‘t caught Omar—what‘s his name—Mullah Omar.  They haven‘t caught any of those people they went over there to get.  So to brag about how these guys aren‘t measuring up to their standards is insane.

Anyway, thank you.  It‘s also shameless.  Thank you, Gene Robinson. 

The troll is out.

(LAUGHTER)

MATTHEWS:  And Michael Smerconish, thank you, gentlemen.

Up next: the growing al Qaeda threat.  Turns out it was an al Qaeda double agent who killed seven CIA officers in that horrible incident over in Afghanistan a few days ago.  What a terrible case, real American heroes over there blown to bits by a suicide bomber who was a double agent.  It is tricky, dangerous work over there for these guys and women.  A woman was in that group, too, that was killed.

That attempted jetliner attack on Christmas Day may mark a significant advance in al Qaeda‘s bombing technology.  We‘re talking about that.  They are really tough to beat right now.  Is al Qaeda getting stronger?  NBC‘s chief foreign affairs—actually, chief foreign correspondent, Richard Engel, has the latest coming up next.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Well, is al Qaeda getting stronger and also smarter?  A double agent for the terrorist network is responsible for killing seven CIA officers over in Afghanistan a few days ago.  NBC News chief foreign correspondent Richard Engel has all the details.  So we‘ve all been watching that case and learning more and more.  Tell us, Rich, what happened, how those seven American people got killed over there?

RICHARD ENGEL, NBC CORRESPONDENT:  This is a fairly long and complicated story, but I think it tells a lot about how sophisticated al Qaeda has become, that they are able now to run double agents and infiltrate the CIA.

This story began actually in Jordan.  And the U.S. and Jordanian intelligence agencies work quite closely together.  The Jordanian authorities first arrested this man.  He was a 36-year-old doctor.  He was a leading member on different Internet Web sites, and that‘s what triggered, or what gave up—made him suspicious to the Jordanian authorities.  They arrested him just about a year ago, a little over a year ago, and started to interrogate him in Jordan.

And during the interrogation, they thought they‘d turned him.  They thought that he had agreed to become an agent for Jordanian intelligence and the CIA and that he would specifically work to target Ayman al Zawahiri.  So his mission was to go back to—or to go to Afghanistan, try and infiltrate the top leadership of al Qaeda, and locate Ayman al Zawahiri.

Initially, it all seemed to be going quite well.  They sent him back to Afghanistan—they sent him to Afghanistan, sorry.  He got back with contacts, some people he already knew through the Internet and was something of a rising star within al Qaeda, a good operative, a good agent.  Everyone was fairly pleased with him.

Then just before New Year‘s, it became apparent, this plot started to hatch.  He called his agents, who didn‘t suspect him because he‘d been passing on information.  He called his handlers, the CIA, and said, I have to come in.  I have urgent information.  I have to see you.  They accepted him.

He met with his handlers.  They even brought in more senior people because they thought—the CIA thought that this informant had such good information that it was really going to be important.  So they had a meeting.  And when he showed up for that meeting, he blew up some sort of explosive, killed seven CIA officers and one Jordanian intelligence officer, who‘s also a distant relative of the king of Jordan.

MATTHEWS:  So, what kind of a setting was this?  They were meeting him.  Was it out in the rural area of Afghanistan, these seven officers, these CIA Americans meeting with him? 

ENGEL:  It‘s a little outpost in Eastern Afghanistan that is a—serves as a good area, because people can move across the border from Afghanistan into Pakistan. 

So, if you want to meet with agents, do some listening, do some controlling, then this is a good place to do it.  I haven‘t been to this outpost, but there are many of these fairly small, quite rugged outposts in Eastern Afghanistan. 

Generally, they‘re not very large, usually just a few dozen to a few hundred people, surrounded by barbed wire and different kinds of blast protection.  But they‘re not big, large concrete structures.  They‘re mostly camps in mountainous areas. 

MATTHEWS:  Well, as a tribute, I must ask you, as an expert, what are our CIA people like over there?  They must be very courageous people to be out there, in that strange land, looking out for us at such a distant posting. 

(CROSSTALK)

ENGEL:  This particular group was considered one of the best that the CIA had.  Some of these agents had been—had been tracking al Qaeda—and this is according to an expert I spoke to today—before most Americans had even heard of al Qaeda. 

So, that is why it is such a devastating blow.  Not only are they Americans, American citizens, mothers and fathers, but they were also real assets to—to national security.  They had the contacts, they had the skill, they had the background.  And their—their loss will—will certainly be felt by the agency. 

MATTHEWS:  Wow.  And evil ain‘t stupid.  The other side is getting smarter, as you put it. 

Anyway, thank you, Richard Engel. 

“The New York Times” reports that Yemen—Yemeni forces killed two suspected al Qaeda militants today and wounded others in a firefight north of the capital.  The battle comes just two days after General Petraeus met with the Yemeni president. 

The United States and British embassies in Yemen remain closed for the second day.  And the French, German, and Japanese embassies also shut down out of a fear of a terrorist attack. 

Bobby Ghosh is the senior editor of “TIME” magazine. 

Bobby, it‘s hard to read from here what we make of that Yemen government—that Yemeni government here.  What is it?  Are they on our side, on the other side, trying to be on our side?  Are they like Pakistan that way, but they don‘t really have their heart in it?  How would you describe it? 

BOBBY GHOSH, SENIOR EDITOR, “TIME”:  I would describe it—I would describe the president, Abdullah Saleh, as a combination of Pervez Musharraf and Hamid Karzai. 

He‘s—he‘s a man who—who rules with an iron fist.  He—his forces are killing his own people.  He does not tolerate religious minorities.  And, on the other side, he has an incredibly corrupt administration.  So, in some ways, he embodies the worst of both Pakistan and Afghanistan‘s leaders. 

MATTHEWS:  What do you make of our sending back people over there for

for rehabilitation?  I mean, one of the handlers of the attacker on Christmas Day was apparently sent back with the theory that he had been rehabilitated through art training. 

GHOSH:  Yes, he had been sent to—to Saudi Arabia.  And Saudi Arabia has a rehabilitation program that gets quite high marks from people, from independent observers, people in this country who have taken a close look at it. 

But there‘s always going to be a few people who fall through, a few people who escape, if you like, the—the system.  And it‘s clear that some of these people are turning up. 

And Saudi Arabia, keep in mind, has been cracking down on al Qaeda in its own borders, and a lot of those people have been fleeing across the borders to Yemen.  So, the situation in Yemen is very perilous at this time.  And the U.S. government really has been thinking and rethinking and trying to figure out what to do with these 100 Yemenis they have in Gitmo.  And it‘s not very inspiring to think that they will turn up in Sanaa and be kept under Yemeni control. 

MATTHEWS:  Well, let‘s think how you translate American politics to the policy over there.  Senator Lieberman, who is quite a hawk, obviously, on that part of the world, said we should be preemptive, we should act preventively. 

What would that mean over there?  How would you prevent more trouble from coming from Yemen? 

GHOSH:  Well, in some ways, we‘re—the U.S. is already doing that.  The U.S. has a long history, the CIA has a long history of taking out al Qaeda suspects in Yemen. 

A few years ago, they killed—the Yemenis killed who they thought was the number-one guy.  They rolled up the number-two guy, and they thought that the problem had been dealt with.  And they thought the Yemenis would mop up the rest. 

Clearly, that has not happened.  The Yemenis in recent months have increased a lot of military action against al Qaeda, to a great degree because of pressure from Washington.  It‘s hard to know what can be done beyond that.  Keep in mind, there are two or three different civil wars fought within Yemen that don‘t have much to do with al Qaeda at the moment. 

So, for the U.S. to get involved as a fourth or fifth party in a very complex mix of wars doesn‘t sound like the best idea, especially given what we have seen in Afghanistan and in Iraq. 

MATTHEWS:  Just to clear this up, going in there and trying to knock them off has nothing to do with encouraging them to attack us by air; they would have gone ahead with this attack on Christmas Day whether we were Mother Teresa or we were Dick Cheney?

GHOSH:  Yes.  And just a few days before Christmas Day...

MATTHEWS:  Is that right?  Is that right?  It‘s just, their decision, they‘re coming at us, they‘re on their own, they know what they‘re doing, and it‘s got nothing to do with our latest attack back at them? 

GHOSH:  No, that‘s—that‘s absolutely correct.  They have set their sights on the West, on the United States, on what they think are ideological grounds, and they‘re not going to stop. 

MATTHEWS:  OK.  It‘s great having you on.  Bobby Ghosh, take care of yourself.  Thank you with “TIME” magazine.

(CROSSTALK)

MATTHEWS:  Up next:  It‘s a brand-new year, obviously, 2010, an election year.  Of course, I love that.  And coming up, we will preview what the Democrats need to do to keep control of the Congress.  It‘s precarious.  They could lose the 40-some seats.  They could lose the House.  They could lose all their advantage in the Senate and be nowhere near the 60 votes they have right now when this thing is all over.

These are bad economic times and fearful times in terms of the threat from terrorism, not a good time to be playing political defense.  Do the oddsmakers think the Democrats can lose it all? 

Stick around for the “Sideshow.”  That‘s coming up.  You‘re watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL, and time for the “Sideshow.” 

As someone who used to work for the speaker of the House in the old days and a pair of U.S. senators before that, I am thrilled when staff people stand up for their beliefs. 

You know, remember that Congressman Parker Griffith?  He is the Democrat from Alabama who just switched last month to the Republican side, another move to catch the local political winds and save your seat.  Well, it turns out his staffers aren‘t so easily blown away. 

Griffith‘s chief of staff, Sharon Wheeler , put out her own press release early today declaring that she and the entire legislative and communications teams in that office would be leaving the office, rather than go with the flow and stay with the congressman when he becomes a Republican. 

They‘re giving up their jobs and salaries in a tough time economically rather than be swayed by the whims of political expediency.  Catch this.  Even Griffith‘s intern walked out today. 

And, speaking of political philosophy, here‘s what Rush Limbaugh said this Friday, shortly after checking out of a hospital in Hawaii. 

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  Based on what happened to me, I don‘t think there‘s one thing wrong with the American health care system.  It‘s working just fine, just dandy.

And I got nothing special.  I got no special treatment other than what anybody else that would have called 911 and had brought in—been brought in with the same kinds of symptoms.  The care was extensive, it was personal, and it was complete.

(END VIDEO CLIP)

MATTHEWS:  Well, first of all, I‘m very glad for Rush personally, obviously, that he‘s OK. 

But the issue isn‘t whether the U.S. has great health quality.  Every bad guy in the world comes here to get saved.  The issue is cost, affordability.  And that‘s what the health care bill is about, getting for millions of people who don‘t have it something like the health care that Rush gets. 

Get it?  Probably not. 

Now for the “Big Number.” 

Right now, the Democrats have a healthy majority in the House of Representatives.  They would have to lose 40 seats this September—or this November—to lose control to the Republicans.  So, what are the chances that they‘re going to lose all 40, lose enough to lose control, that the Democrats would be no longer be in House after the midterms?

Well, according to the oddsmakers at Intrade.com, there‘s a 67 percent chance, chances are two in three that the Democrats will hold onto their majority.  So, it still looks moderately good for the Democrats, 67 percent chance they will hold on to their House majority and keep the speakership.  That‘s tonight‘s “Big Number.” 

So, those are the odds.  Up next: the high stakes of the 2010 midterms.  We‘re going to preview some of the hottest races that could determine whether Democrats are able to hold on to control of the U.S.  Congress this coming November.  The election has begun.  The campaign is on.  We‘re here and we‘re there. 

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATT NESTO, CNBC CORRESPONDENT:  I‘m Matt Nesto with your CNBC “Market Wrap.”

Stock kicking off the new year with a big rally, thanks to energy and commodity shares—the Dow industrials up more than 155 points, the S&P also up about 1.5 percent, same for the Nasdaq—all three benchmarks setting new 15-month closing highs. 

Investors liked the looks of an upbeat manufacturing report, the ISM factory gauge climbing more than two points in December.  That was better than expected and up for the fifth straight month. 

The weak dollar, however, helped boost the markets.  Traders took advantage, sapping up more volatile commodities, at the expense of the weaker greenback. 

And a big day for the Nasdaq, as we said, built on strong gains for Intel and Apple, benefiting from analyst upgrades.  And investors still excited about Apple‘s soon-to-be released tablet computer.  “The Wall Street Journal” reporting it will be unveiled this month and begin shipping in March. 

And, finally, plummeting temperatures across much of the U.S. had oil prices up more than two bucks today, settling above $81 a barrel.  That‘s the highest level in 15 months. 

That‘s it from CNBC, first in business worldwide—now back to

HARDBALL. 

(LAUGHTER)

MATTHEWS:  Just saw that Phillies hat.

Anyway, welcome back.  We‘re on base.  We‘re covering politics. 

Welcome back to HARDBALL. 

2010 is here.  Finally, it‘s time for the midterm elections coming up from now through November.  The HARDBALL team here is going to be covering the whole fight better than anybody out there, as always.  Democrats are defensive this year.  They got what they want.  Will they keep it?  Republicans don‘t have what they want.  Will they get it?  Their rhetoric is hotter than hell right now.  Are they going to be able to chip away and grab that majority away from Nancy Pelosi?

What‘s the forecast?  What‘s it going to be like for President Obama‘s party this year? 

“Newsweek”‘s chief political correspondent, Howard Fineman, is the MSNBC political analyst.  And NBC political analyst Charlie Cook is editor and publisher of “The Cook Political Report.”  So, we have got the best quantitative guy here and the best prose guy here that cover politics.

(LAUGHTER)

MATTHEWS:  No poetry in the room, obviously.

(LAUGHTER)

MATTHEWS:  But this question comes to mind. 

Charles Cook, you are the most nonpartisan person I know.  And you are as well.  You guys are really coldly, coldly, coldly, coldly analytical, right?  That‘s your strength.

CHARLIE COOK, NBC NEWS POLITICAL ANALYST:  Right.  Yes. 

MATTHEWS:  Are you normally a bit more cautious about change than other people?  When we get your numbers, I want to know how to put them.  Are you more cautious?  Like, I think it‘s possible the Democrats could lose the 40 seats and lose the majority, because I saw what happened in ‘93-‘94, when people were really mad at the Clintons.  And there was no recession.  Now we have got a 10 percent unemployment rate, the threat of terrorism, and there‘s sort of a general angst out there. 

COOK:  My historic pattern is very, very cautious. 

But, starting in August, we started talking up, look, this is a chance for real, real losses for Democrats in the Senate.  And a little less than a month ago, we started going—right now, Democrats need to lose 40 seats to lose control of the House.  We were saying 15 to 25.  Now we‘re saying a 20- to 30-seat loss for Democrats right now.

MATTHEWS:  What‘s changing in your...

(CROSSTALK)

COOK:  Well, we‘re seeing more retirements in tough districts.  We have seen one party switch since then. 

But what basically is, though, there‘s solidly or probably in the Democratic column exactly 218 seats, the barest majority.  And, so, Republicans could win every competitive race and still come up one seat short.  But if we see more of the kind of erosion we have seen in the last five or six weeks of Democrats that had looked to be in good shape suddenly not looking in good shape, then you could see a tipping point. 

MATTHEWS:  Yes.   

COOK:  So, we‘re not at the tipping point, but we‘re a lot closer than we were two or three months ago.  And...

(CROSSTALK)

MATTHEWS:  You think we‘re close to a tipping point, where it could go, like it did in ‘94, like it did in ‘80, one of those big change years? 

COOK:  Democrats can‘t have another two months like the last two months. 

MATTHEWS:  OK.

I don‘t see any change in the economic outlook.  In fact, I see, reading the papers today closely, some talk of a second dip.  I see bad times economically between now and when people make up their mind next summer. 

What do you see?  Is there any reason not to go with what he just said? 

HOWARD FINEMAN, NBC CHIEF POLITICAL CORRESPONDENT:  Well, the economics, we know.  I think the bigger news in the last week or two is that I think the president has lost control of the narrative of the fight against terrorism and of national security. 

MATTHEWS:  Was he hurt by being in Hawaii, that simple thing? 

FINEMAN:  I don‘t think he was hurt by—I don‘t think he was hurt by being in Hawaii specifically.  I think some of the early comments by administration officials were off the mark. 

And I think he got elected partly as the guy who could make us more secure by being more sophisticated in his knowledge of the world.  Anything that—anything that pushes him back into the Bush territory on that side of the equation is not helpful to him. 

Charlie‘s right about the economy.  The other thing is, the health care legislation may end up benefiting a lot of people.  But the politics of how it‘s been constructed and sold has not helped the administration or the Democratic party.  The people who are most likely to benefit, young people, Hispanics, some people like that in the south and southwest, are also less likely to vote in a midterm election. 

MATTHEWS:  That‘s what I want to get to.  You know, I was on a black radio station yesterday.  I do exhort people to vote.  I say, vote.  Because if you don‘t vote, the other people do.  Oftentimes, those other people are people who don‘t agree with you.  You‘re not only giving away your vote.  You‘re doubling the vote of the other guy, the guy who disagrees with you. 

COOK:  All of the intensity the Democrats had in ‘06 and ‘08 and how lethargic Republicans were in those two elections has flipped.  Republicans have the intensity and Democrats are disillusioned. 

MATTHEWS:  What‘s intensifying the Republicans?  Is it the Tea Party anger of taxes and health care?  Is it something about Barack Obama personally?  Is it all that? 

COOK:  It‘s all of that.  The thing is, the strongest factor in American politics is hate.  Love—Love—Love is good.  Hate‘s better. 

MATTHEWS:  I love this because I completely believe it.  In other words, I heard this in high school, that Americans vote negatively.  They vote against what they fear, what they don‘t like.  This could be bad for a lot of people. 

COOK:  Democrats in ‘06 and ‘08 hated President Bush.  They the

Republican majority.  Now the hate is going the other way.  The other thing

--

MATTHEWS:  This wouldn‘t work on NPR. 

FINEMAN:  I would say fear not hate. 

MATTHEWS:  He said hate.

COOK:  I know. 

MATTHEWS:  Don‘t correct him.  Stick with hate. 

COOK:  Here is the irony: the biggest problem Democrats have is the economy.  The criticism that Republicans had of the Obama economic package was it was too big.  The ironic thing is it wasn‘t big enough.  Yet they‘re still going to—

MATTHEWS:  You know what I heard last year from my Republican brother in Pennsylvania?  He said if you want a simple Republican slogan coming into these next elections, just say, you want it back.  You want what you had two or three years ago, in terms of your 401(k), your job security, your outlook for your kids.  You want back what you had in 2006 and ‘07.  You don‘t want the Iraq War building up again, but you want all the stuff that‘s good that you remember. 

FINEMAN:  The one thing that‘s keeping me, just as a general proposition, from saying the tipping point has been reached—by the way, Charlie and his people were out ahead of this, I think—is that the Republicans are not very popular at all.  I know hate matters and fear matters.  The Republican brand is in the dumper.  It just is. 

MATTHEWS:  Because of the—

FINEMAN:  Wait a minute.  In 1980 and ‘84, it was a different Republican party.  It was more broadly based ideologically and sociologically, in some ways.

MATTHEWS:  If that‘s true, why do flawed candidates like McDonough (ph) and Chris Christie up in New Jersey, not superstars, not evil or anything, but not superstars—why did they win so handily with the Republican brand name? 

FINEMAN:  In the case of New Jersey—

MATTHEWS:  Why is Toomey running with even with Specter in Pennsylvania?

FINEMAN:  I‘m saying, there are going to be cases where that‘s going to work.  As a general proposition, in states like Kentucky, in a place I know like Louisville, where that is always a swing seat, the Democrat is safe there because the Republicans in that part of the state are not broadly enough based. 

MATTHEWS:  Could this be the chance for Republicans, just because of conditions, how bad they are right now, to make a comeback in the governorships in the northeastern states? 

FINEMAN:  That‘s interesting, yes.

MATTHEWS:  Win back some of these states?  Maybe knock off Paterson

if he‘s the Democrat nominee in New York.-

FINEMAN:  I think Pennsylvania is a possibility. 

MATTHEWS:  Massachusetts, they could win?  A lot of these places they could win the governorships. 

COOK:  Also governors races are less left/right. 

MATTHEWS:  A good chance to knock off the incumbent. 

FINEMAN:  If they run as problem solvers, the way they did in Virginia. 

MATTHEWS:  I would rather be the out party, whichever party that is.

MATTHEWS:  If you‘re thinking about running as a Republican moderate in the northeastern United States, anywhere in the New England states, anywhere in the mid-Atlantic states, it‘s a damn good year to run. 

COOK:  If there‘s one saving grace for Democrats, though, is the Republican brand is so much more damaged than Democrats were in ‘06 when they took over, or Republicans were in ‘94. 

MATTHEWS:  What should the Republicans say to the people?  Does that word say?  Does it say Rush Limbaugh?  Does it say Sarah Palin?  Does it say Bush? 

FINEMAN:  It says one word.

MATTHEWS:  Screwing up Katrina? 

FINEMAN:  It says one word.

MATTHEWS:  What?

FINEMAN:  -- no.  That‘s the Republican word, no.  And because Barack Obama has—

MATTHEWS:  But if it‘s hate, maybe people want no. 

FINEMAN:  OK.  But if Barack Obama has behaved in their eyes they were afraid a northern liberal would behave, too much big government, that‘s what‘s energized the Republican base across the south. 

MATTHEWS:  Unpredictable election or likely to be a big Republican win, what would you say? 

COOK:  I would say big Republican win, but they come up just short of winning the House back. 

FINEMAN:  I think Charlie‘s probably right.  I think the Senate‘s going to be interesting.  I think the Republicans are going to pick up five or six seats in the Senate. 

MATTHEWS:  People complain about the Democrats not getting enough of the 60 votes, wait until you see what they are going to get when they have about 53 senators, if they‘re lucky.  That‘s why they‘ve got to go for what they get right now.

COOK:  But they will be more cohesive. 

MATTHEWS:  A smaller church. 

COOK:  Yes. 

MATTHEWS:  Thank you, Howard Fineman.  Thank you for that biblical

reference, Charlie Cook.

Up next, are the Republicans like Dick Cheney once again playing politics with national security?  That‘s a wide-open obvious question—yes.  We‘ll be right back with the blame game, the patriot game I‘m calling it.  Is it fair any time you disagree with somebody about security to call them not interested in defending the country?  That seems to be what they‘re doing these days.  The politics fix back in a minute.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Time now for the politics fix.  Joining me now is the “Washington Post‘s” Ann Kornblut, whose new book—hot new book, “Notes From The Cracked Ceiling,” all about women in politics and the role of Hillary Clinton in changing history last year, and the “Politico‘s” Jonathan Martin.  I shouldn‘t say last year.  It‘s now the year before last.  Time flies.

Ann Kornblut, we‘ve been having some time sort of festering about Dick Cheney here, because he has really come out as the main attack dog of the past administration, going after everything Barack Obama does.  Every time there‘s an opening, he jumps up and bites the guy, hits him on every motivation, incompetence.  Accuse him almost of lacking patriotism.  Is this a political strategy or is this just what, emotions on his part?  

ANNE KORNBLUT, “THE WASHINGTON POST:  I was just going to use the word emotion, actually, because it seems like he‘s become sort of the emotional core of the critics of Obama at this point.  It‘s not really—during the Bush administration I don‘t think we would have used the word emotion to describe him.  

MATTHEWS:  Well, he was in an undisclosed location most of the time. 

KORNBLUT:  He was very dispassionate.  He was always the sort of rational, calm person talking about terrorism.  Now, whenever, it seems, their is a terrorist moment, a moment on national security, we hear Cheney being the one to articulate sort of the darkest fears of the Obama critics.  That‘s certainly what happened, wasted no time in this case doing that.

MATTHEWS:  You know, if your chief of staff had five felony count convictions during your past service in government, you would think you‘d be more quiet these days.  The man is without shame.  Go ahead. 

JONATHAN MARTIN, “POLITICO”:  I thought you were referring to his deferments from Vietnam.

MATTHEWS:  I‘m referring to these five felony counts for his chief of staff, running his office.  Wasn‘t exactly a clean operation—go ahead—that he oversaw.

MARTIN:  Look, I‘m not sure it‘s great politics for the GOP to have the voice of their national security wing coming from the former vice president.  I think they—

MATTHEWS:  Are they not hoping for a disaster, but if a disaster comes—

MARTIN:  They can‘t do anything about it.  You think Boehner or McConnell‘s office are going to call the former vice president and say, you know, pipe down?  it‘s not going to happen.  He‘s going to say what he wants to say.  He‘s going to carry that message.  He feels strongly about it and he has that right to do it.

But the GOP infrastructure, I‘m saying -- 

(CROSS TALK)

MATTHEWS:  Does he have like a hotline to you guys, where he gets up in the morning and he and Lynn start punching at the word process and get Liz to run across the street with this stuff?  He had his stuff to you guys, what, at 6:30 in the morning that morning? 

MARTIN:  You‘d have to ask my colleague.  But we report news from all sides.

MATTHEWS:  He used you like he uses Drudge or something.  why does he go to you guys. 

MARTIN:  You would have to ask the vice president, Chris.  I‘m not sure.

We aggressively report on both sides.

MATTHEWS:  It‘s not reporting.  He feeds you this stuff.  I do like “Politico.”  But he‘s feeding you guys this crap. 

KORNBLUT:  Let me—

MATTHEWS:  Why doesn‘t he go to the Post and say—

KORNBLUT:  I think there is no question that whether it were going to be “Politico” or elsewhere, he‘s going to make this known. 

MATTHEWS:  What‘s he call up and say, I‘ve got a hot one for you, John?  Can you take—what‘s your e-mail address?  Is that what he does? 

MARTIN:  I couldn‘t tell you. 

MATTHEWS:  It‘s not like he has a big staff anymore.  He has to get up in the morning, read the paper, start typing away this feverish—let‘s take a look.  Let me know when we have this ready, because I would love to show what the vice president had to say.  He‘s maddening these days.  Your thoughts?

Here‘s the vice president of the United States putting out this statement here in the morning.  He puts this out.  We don‘t have it yet.  We‘ll have it in a minute.  We‘re going to have it.  I‘ll tell you, most vice presidents, when they retire, they go away. 

KORNBLUT:  One of the things he said in the statement you put up is that the president, President Obama, is afraid to talk about it as a war on terror. 

MATTHEWS:  He did.  He did that consistently.

KORNBLUT:  It‘s actually pretty easy to go back and refute that. 

MARTIN:  Yes.  We did. 

MATTHEWS:  His inaugural address.  . 

MARTIN:  What‘s going to be interesting during the midterms is what candidates want him there, and what candidates don‘t want him there?  For example, Mark Kirk, running for the Senate in Illinois, a blue state, someone who has got to get a lot of moderate voters, is he going to have Dick Cheney there?  I‘m not sure. 

But look at Texas.  A primary down there, a really hot primary between Kay Bailey Hutchison and Rick Perry.  She‘s already had Cheney down there.

MATTHEWS:  She‘s the moderate down there.  

MARTIN:  He can play some places very, very well for Republicans, especially in a primary.

MATTHEWS:  This problem of politicizing terrorism is scary, because what it does is create a terrible situation where when something goes wrong, then one party gains politically, the other party loses politically.  What you do is you set up a situation—even if there were no motives here.  You see what I‘m saying?  In other words, if we get hit again or struck again or attempted again, there will be a political calculation made immediately as to which party was benefiting or which party was exploiting it, because of the way Cheney is politicizing this thing now.   

KORNBLUT:  I think that was probably bound to happen regardless.

MATTHEWS:  Well, here‘s what he said.  Listen to this, what he said.  We‘ll be right back.  Here he is.  Here‘s “President Obama is trying to pretend we‘re not at war.”  What does that mean?  That‘s Cheney.

MARTIN:  He‘s trying to make an argument that this president is not on a sort of footing that the past administration was.  They aren‘t taking the threat against America as seriously.  I think that‘s what he‘s trying to convey.

MATTHEWS:  We‘ll be right back with more.  Let‘s talk about this election coming up because I think this election is taking shape right now.  It‘s either going to be about terrorism or the unemployment rate, and Neither help this president.  We‘ll be right back with Anne Kornblut and Jonathan Martin with more of the fix. 

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with Anne Kornblut of the “Washington Post” and “Politico‘s” Jonathan Martin.  Anne, you were just in Hawaii with the president.  Did you get a sense that he sensed, and the people around him, they were in the wrong place to be in Hawaii, basking in the sun, even though he came up from there, he grew up there, at a time that the country is under snow and horrible weather, and just got a near miss with a bombing attack on an airplane? 

KORNBLUT:  Yes, it took them a couple days to reach a conclusion—

(CROSS TALK)

KORNBLUT:  It certainly felt—not initially—it first, it wasn‘t clear what the bombing attempt was.  But once it became clear what it was, it certainly felt like they needed to get out there and talk more.  And it took a couple of days.  They had gotten there late because of the Senate vote on health care.  The president hadn‘t been back there since he was not even president yet and this was his home base.  So I think there was a reluctance to go rush in, drag him out of his vacation immediately.  They took until Monday to do it.  I think, in hindsight, they wished think had done it sooner, because they spent the rest of the week making up for it. 

MARTIN:  I think a day or two probably would have served them better. 

MATTHEWS:  If he came back—

MARTIN:  It‘s a very—I don‘t think it was clear the day when it happened.  Even the day after it happened it wasn‘t all that certain.  By Monday, it was pretty darn clear that this was a serious attempt at terrorism.  I think if they could do it over again, they would do it over again that Sunday when—

MATTHEWS:  You know what people like to say when there‘s a big fire in the city?  They like to see the fire chief and mayor standing there on the curb watching the fire.  They like to know you‘re there. 

MARTIN:  That‘s why he did the two appearances back to back.  The second one being kind of a do-over, right?

MATTHEWS:  Thank you.  Thank you, Anne Kornblut.  Thank you, Jonathan Martin.  Good luck with your book. 

KORNBLUT:  Thank you. 

MATTHEWS:  Join us again tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL.  Right now it‘s time for “THE ED SHOW” with Ed Schultz.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

END   

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